Contrarian value investors is always looking for stocks that the market has overlooked. In times of economic uncertainty – when stock prices become erratic – good quality stocks can become cheaper. The question is whether ETR: SWA“> Schloss Wachenheim Ag (ETR: SWA) is currently one of them.
Buying good quality stocks at cheap prices is a popular stock market strategy – but it is not always easy to see the difference between a genuine trade and one value trap. Often it is quality of the stock does all the difference.
That ETR: SWA“> Schloss Wachenheim Ag the share price is currently trading at 15.2. And the promising news is that it has some of the features that are often associated with thaw influential drivers of return on investment: high quality and one relatively cheap valuation.
To understand where they appear, here is a closer look:
Purchase quality at a reasonable price
Good quality markets are loved by the market because they are more likely to be solid, reliable companies. Profitability is important, but it is also the financial strength of the company. A track record of improving the economy is important.
One of the quality goals for ETR: SWA“> Schloss Wachenheim Ag is that it passes 8 of 9 economic tests in Piotroski F-Score. The F-Score is a worldwide accounting-based checklist for finding stocks with an improved financial health trend. A good F-Score suggests that the company has strong signs of quality.
While quality is important, no one wants to pay too much for a stock, so an appealing assessment is also important. With a weaker economy, earnings forecasts are unclear across the market. But there are some valuation measures that can help and one of them is the earnings dividend.
Earnings dividend compares a company’s profit with its market value (calculated by dividing its operating profit by its company value). It gives you a total value of the stock (including its cash and debt), making it easier to compare different stocks. In percent, the higher the earnings dividend, the better the value of the stock.
A rule of thumb for a reasonable earnings dividend can be 5%, and the earnings dividend for ETR: SWA“> Schloss Wachenheim Ag is currently 9.69%.
In summary, good quality and relatively inexpensive valuations are references to the stocks that are some of the most appealing contrarian value investors. It is among these stocks that genuine mis-pricing can be found. Once the market has recognized that these quality companies are for sale, these prices often return.
What does this mean for potential investors?
Finding good quality stocks at cheap prices is a strategy used by some of the world’s most successful investors. But be warned: these factors do not guarantee future returns, and we have identified some areas of concern Schloss Wachenheim Ag which you can find out about here.
Alternatively, if you would like to find more stocks that show signs of having strong quality and value, just come and look at this Quality and value screen.
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